1. Technical Field
The following disclosure relates generally to the active monitoring and managing of a portfolio of loan obligations, and, more particularly, to a computer system and related methods for evaluating, selecting, and executing one or more financial instruments to enhance the collateral security for a portfolio of loans in order to obtain financing and facilitate securitization.
2. Description of Related Art
Computer systems are helpful tools in the management of financial products such as loans and insurance. Over the years, as computing speed and capacity has increased, the computer database has grown in its capacity to store and process large amounts of data in one or more tables. Relational databases may include multiple tables, linked together, wherein each table can be configured to store a certain type of data. Relational database systems may provide a structure in which to work, but many modern financial plans, financing structures, and products require the design and construction of a system tailored to fit the needs of the particular plan.
In the field of life insurance and annuity products, a policy or product may be purchased and the premium paid in monthly installments. As an alternative, a loan may be obtained and used to pay the premium all at once, in one or more lump-sum payments. The borrower may sign a promissory note or other agreement to make payments on the loan. The value of the policy or product itself may provide a basic level of collateral security for the loan, but typically there is a gap between the value of the policy or annuity and the amount of premium paid, especially at the beginning of the life of the policy. The gap represents an amount at risk that is generally unsecured by any collateral.
The amount of the gap often has a direct effect on the pricing and other terms of a premium loan. A higher gap amount, for example, may require the borrower to pay a higher interest rate. In other words, less attractive borrowing rates are available for loans when there is a higher gap amount, because the amount of the gap affects the lender's exposure in the event of default with respect to the loan.
The amount of the gap typically changes over time, depending on a variety of ever-changing factors including but not limited to the amount of premium paid to-date, the actuarial risk of surrender, the accumulated value of the policy or product, the cash value of the policy, the commissions paid by the carrier or insurer, the crediting rate of the particular carrier, and other factors affected by the specific terms and conditions of the policy. One technical problem in the field is the lack of a system for analyzing the effect of all these factors, over time, in order to monitor the changing value of the unsecured gap.
Another technical problem in the field is presented by the complicated task of analyzing and monitoring the gap amount for multiple policies or products. The task of analyzing the gap amount grows much more complicated when multiple loans must be evaluated. The task grows further complicated when each loan in a group of multiple loans has different terms and provisions, various kinds of underlying collateral security, and a different risk profile. Thus, there is a need in the art for a system for continually monitoring and evaluating the default exposure associated with a set of loans, over time, as the loan status, amount at risk, product values, and risk of default are progressively changing.
Yet another technical problem when multiple loans are financed as a group is the technical challenge of applying and allocating periodic loan payments between and among the various operating and escrow accounts of the lender, loan originator, credit provider, loan servicer, and other agents and participating entities. Proper allocation of payments is required to satisfy the terms of the contractual agreements between and among the parties. In addition, when multiple loans are involved, the allocation of payments may affect the gap amount. In this aspect, the technical problem of allocating funds is related to the technical challenge of monitoring and analyzing the gap amount.
The need in today's financial markets for an accurate and up-to-the-minute risk assessment for loan obligations, especially premium loans for products having a varying gap amount, represents a technical challenge because of the number of variables that must be analyzed in order to produce an accurate, reliable, and creditworthy evaluation.